The Paris Club is yet to start work on a creditor committee for Sri Lanka to assist the country with its debt restructuring process, as Sri Lanka is trying to obtain financial assurances from China and India, Nikkei Asia reported.

Accordingly, Colombo-based diplomats and Europe-based financial insiders with knowledge of the Paris Club’s workings had told Nikkei Asia that progress over the Sri Lanka question remains clouded. 

Moreover, a highly placed source familiar with the discussions in Paris had told  Nikkei Asia that no creditor committee work has started yet for Sri Lanka.

Sri Lanka’s dependency on the Paris Club – headed by an official from the French Treasury – emerged in May after the country formally defaulted on its sovereign debt, as it ran out of US dollars.

The main Paris Club creditor that has lent to Sri Lanka is Japan, holding over 19.5% of the total foreign debt stock. 

Western-leaning diplomatic sources in Colombo are raising flags over China’s lending practices, such as details kept under wraps and secrecy clauses in loan contracts.

“Information sharing to ensure full disclosure of the loans is a touchy issue when it comes to Chinese lending,” a senior diplomat had told Nikkei Asia. “This puts Sri Lanka on the spot, and it will have to resolve the transparency issue bilaterally with China, rather than expect the Paris Club to step in.”

Earlier this month, Hindustan Times reported that the Paris Club is proposing a 10-year moratorium on Sri Lankan debt and another 15 years of debt restructuring as a formula to resolve the current financial crisis in the country. 

Sri Lanka expects to obtain financial assurances from creditors by January 2023, in order to access the programme by the International Monetary Fund (IMF).